But there's another big story behind this Flash fiasco that has successfully remained off the radar of most. It's the answer to this question: How do the media companies -- you know, those people who use Flash to put their premium content online everywhere from Wired.com to hulu.com -- feel about having their primary delivery tool cut off at the knees?
Answer: Media companies hope to complain all the way to the bank.
First, a bit of disclosure. I'm the one who went on record explaining that the lack of Flash is one of the reasons I am not buying an iPad. So I'm clearly not a fan of the anti-Flash rhetoric for selfish reasons: I want my Flash content wherever I am. But I've spent the last few weeks discussing the Apple-Adobe problem with major magazine publishers, newspaper publishers, and TV networks. Their responses are at first obvious, and then surprisingly shrewd.
Simplicity has been central to Spotify’s success to date. In fact the Spotify experience was so simple it looked positively archaic compared to more feature-rich and socially-rich services such as Last.FM and imeem. But that simplicity was Apple-like in its elegance and a key reason it has proven so popular. The barriers to entry were lowered so that it had mass-market appeal rather than being condemned to ending up as another niche hide-out for the tech savvy music aficionados.
Spotify was always going to flick the switch on a greater level of sophistication, but only when it needed to. Doing so now is a very cleverly timed move. Today’s announcement both raises the stakes for new entrants such as mFlow and beats Apple to the music cloud. To understand why, we need to take a quick look at what strategy the new functionality implies. The two most important groups of functionality are social and cloud.
Spotify becomes a social experience. Spotify has always had a keen sense of how to coexist in the broader ecosystem rather than try to do everything itself (cf integrating audio scrobbling). It has now taken that a step further with Facebook integration and relatively sophisticated sharing and interaction. Doing it in the context of Facebook simplifies the education process for users.
Downloads aren’t replacing the CD. Digital sales in 2009 boomed - growing by 48% - offsetting the impact of CD sales decline for the first time … just … (online digital revenue growth was 53m GBP compared to a CD decline of 48m GBP). But this isn’t a simple downloads versus CDs picture. In these days of plummeting CD sales, recorded music numbers encompass a pretty diverse portfolio of products and revenue streams, including DVDs, mobile, ad-supported streaming, etc.
The digital model is far from fixed yet. The download market will not save the music industry. It will be one small part of a multifaceted product portfolio. 48% digital growth may sound good but it is important to keep a sense of scale: download revenues are just 21% of CD sales and mobile revenues actually *declined by 14%*. The CD remains the bedrock of sales not because it is a robust product but because the competition is so weak.
The Hulu-will-charge-you-money rumor mill is churning once again and the blogosphere has lit up with preemptively angered Hulu viewers vowing that they will never darken Hulu’s digital door again. Some call it greed, others point to nefarious pressure from ailing broadcast and cable operations, while some decry the end of a freewheeling era. They are all wrong.
Hulu charging for content is a good thing. In fact, it’s a necessary next step to get us where we need to be. Let me explain.
This comes at an awkward time, to say the least. The site’s CEO, Jason Kilar, admitted just weeks ago that the free site is profitable, taking in more than $100 million last year and on a run-rate to more than double that this year. Blunting that momentum would be foolish. But letting it run absent the burden of helping to pay for the shows it profits from would also be irresponsible, and not in a Father-knows-best “charging for content builds character” kind of irresponsible, but in a more “not taking advantage of the opportunity to take Hulu to the next level in benefit of the consumer” kind of irresponsible.
Regular readers will be familiar with the mantra that I and my colleagues repeat: we are leaving the distribution era of the 20th century where music revenues were based upon selling units and entering the consumption paradigm, where monetizing consumption will be key to future success.
I recently came across a case study that illustrates well just how far along we are in the transition from a consumer perspective, if not yet from a business model viewpoint.
Armin van Buuren is a leading dance music DJ and producer, but unless you are Dutch, or a dance music aficionado it is unlikely you’ll be too familiar with him. Hailing from the Netherlands van Buuren has been producing music and DJing since the mid-nineties. Throughout the noughties he went from strength to strength, in no small part due to a very savvy use of digital technology including a weekly radio show (A State of Trance) that is syndicated across multiple analog and digital stations and platforms and reaches a weekly global audience of 40 million.
This context is important because van Buuren understands the importance of building an engaged digital audience. Which brings us onto the case study: his track ‘In and Out of Love’ featuring vocalist Sharon den Adel. The official video currently has 50.5 million views on YouTube. There are an addition 3.3 million unofficial video views of the track, of which 0.5 million are remixes and live versions. So that's a net total of just under 54 million views.
Consider those numbers for a moment. The biggest ever selling global single was Elton John’s Candle in the Wind in 1997 with 37 million copies. The biggest that the noughties had to offer was Leona Lewis’ ‘Bleeding Love’ with 12 million. Even Lady Gaga only made 11 million with 'Poker Face'. Getting to number in the UK charts can be done with less than 25,000 if you catch the charts on a bad week (Orson did it with just 17,694 in 2003 with ‘No Tomorrow’).
Spain’s piracy problem appears to be testing content owner’s patience. Sony Pictures’ chairman Michael Lynton was reported yesterday as saying "People are downloading movies in such large quantities that Spain is on the brink of no longer being a viable home entertainment market for us."
Spain has long been the content piracy hub of Europe, both online and offline. Online music file sharing stands at over 30%, that’s more than double the European average. Movie and TV file sharing in Spain are both more than three times the European average. It is no coincidence that during the Spanish recorded music industry lost half its value last decade.
But that doesn’t justify Mr Lynton’s position. Like it loathe it (and if you’re a content owner it’s probably the latter) Spain is the shape of things to come. By that I don’t mean everyone is going to become a BitTorrent user, but consumers’ relationships with content is changing irrevocably. They increasingly just expect content to be there, and – also in growing numbers – don’t expect to pay a per unit fee for it. This is the Media Meltdown.
Instead of creating some sort of creative trade blockade around Spain – which of course will just force more Spaniards on to P2P networks to find Sony content – Sony and other content partners should invest their time and efforts instead on making Spain a test bed for content monetization models in the digital age.